Most people get tax refunds from the government. But if you don't pay enough in tax upfront, then you can end up having to pay penalties for failing to make estimated tax payments. How can you figure out whether you should pay estimated taxes in 2014?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through the basics of estimated tax payments and who should make them. Dan notes that to avoid penalties, you generally have to have 90% of your tax liability withheld through payroll withholding. If you don't, you'll need to make quarterly estimated tax payments in April, June, September, and January to make up the difference. Dan goes through a safe-harbor provision, though, that offers an alternative to making a guess about your current-year tax liability. Although the penalties aren't egregious, Dan concludes that they're unnecessary with a little planning.
Be smart about your taxes for 2014
Making sure you don't have to pay penalties and interest for failing to make estimated tax payments in 2014 is just one way you can cut your tax bill to Uncle Sam. In our brand-new special report "How You Can Fight Back Against Higher Taxes," The Motley Fool's tax experts run through what to watch out for in doing your tax planning this year. With its concrete advice on how to cut taxes for decades to come, you won't want to miss out. Click here to get your copy today -- it's absolutely free.
Neither The Motley Fool nor Fool contributor Dan Caplinger has any position in any stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.